AUD/USD turns sideways above 0.6300, Australian CPI grabs focus
- AUD/USD is oscillating above 0.6300 as investors await the Australian CPI release for a decisive movement.
- Positive market sentiment failed to support the commodity-linked currency.
- Weaker employment data and higher inflation projections are complicating things for the RBA.
The AUD/USD pair has developed a cushion around 0.6300 in early Tokyo after dropping from Monday’s high at 0.6411. Earlier, the asset displayed a breakout of a tad longer consolidation formed in a range of 0.6170-0.6355 but has come back inside the woods. The antipodean faced severe pressure despite an upbeat market sentiment.
S&P500 extended their gains on Monday after a cheerful Friday. The US dollar index (DXY) faced selling pressure while attempting to overstep the critical hurdle of 112.50. However, the 10-year US Treasury yields gained some confidence despite the positive risk profile, recovered their Monday morning losses, and settled comfortably near 4.25%. The commodity-liked currencies are diverging with positive market sentiment due to the confirmation of China’s XI Jinping's third term of leadership.
Investors share concerns over the continuation of China Jinping’s leadership citing his ideology-driven approaches to operating the economy even at the cost of economic growth. This has dampened sentiment for Chinese markets and its trading members.
On Wednesday, investors will keep an eye on Australian Consumer Price Index (CPI) data. The headline inflation may accelerate to 7.0% vs. the prior release of 6.1% on an annual basis. On a quarterly basis, the plain-vanilla CPI could decline to 1.5% against the prior print of 1.8%.
A release of a higher-than-projected CPI may force the Reserve Bank of Australia (RBA) to return to its previous pace of hiking interest rates. A less-hawkish approach to policy rate is far from over. The job of combating inflation for RBA policymakers has become more difficult as the labor market is also not supportive.